Tata Motors Fundamental Analysis: The multi-bagger stock

  • Reading time:22 mins read
  • Post author:
  • Post last modified:03/12/2021

This article provides an in-depth fundamental analysis of Tata Motors, which is one of the biggest Automobile companies in India. In this article, we have Analyzed the business, financials, fundamentals, and stock performance of Tata motors.

This will help you evaluate is Tata Motors better for investment. But before I proceed, please note that our analysis is only for educational purposes and not to provide stock tips. This article is to empower you with the right knowledge so that you can make an informed investment decision.

Tata motors fundamental analysis: Company profile

Tata motors is a $44billion organization. It is a leading global automobile manufacturing company. Its diverse portfolio includes an extensive range of cars, sport utility vehicles, trucks, buses, and defense vehicles. Tata Motors is one of India’s largest OEMs offering an extensive range of integrated, smart. and e-mobility solutions.

Part of the multi-national conglomerate, the Tata group have operations in India, UK, South Korea, South Africa, China, Brazil, Austria, and Slovakia through a strong global network of subsidiaries, associate companies, and joint ventures, including Jaguar Land Rover in the UK and Tata Daewoo in South Korea.

Tata Motors has operations in more than 125 countries, a $14.60 billion market cap, sold 8,37,783 vehicles in FY 21 ( excluding JLR sales ), and Rupees 2,49,705 crores in revenue.

  • Established in 1945.
  • 75,278 employee strength as of FY 2020-21.
  • more than 8,400 sales & service points.

Best stocks below rs 500 in India.

milestones in Tata motors journey

Tata motors fundamental analysis

Global presence of Tata Motors

global presence of tata motors
In FY 2020-21.

Also read: Basic stock valuation methods.

  • India – 10 manufacturing facilities, 2 R&D centres, 4,65,734 vehicles sold, and rupees 50,381 crores in revenue.
  • North America – 1 R&D centre, 93,759 vehicles sold, and rupees 46,947 crores in revenue.
  • China – 1 joint manufacturing facility, 112,424 vehicles sold, and rupees 44,687 crores in revenue.
  • UK – 5 manufacturing facilties, 3 R&D centres, 81,500 vehicles sold, and rupees 37,244 crores in revenue.
  • Europe – 2 manufacturing facilities, R&D centre, 76,606 vehivles sold, and rupees 34,045 crores in revenue.

Revenue by geography

tata motors revenue by geography
In FY 2020-21
  • 20% of the revenue are from India.
  • 19% of the revenues are from USA.
  • 18% of the revenues are from China.
  • 15% of the revenues are from UK.
  • 14% of the revenues are from EU ( excluding UK ).
  • 14% of the revenues are from Others.

Tata motors revenue mix

tata motors fundamental analysis
In FY 21.

The majority of the revenues of Tata motors are from Jaguar and Land Rover, followed by Tata motors commercial vehicles, Passenger vehicles, and Tata motors finance ( which is a subsidiary of Tata Motors ).

  • 78% of the revenues are from Jaguar and Land Rover.
  • 13.3% of the revenues are from Tata Motors commercial vehicles.
  • 6.8% of the revenues are from Tata Motors passenger vehicles.
  • 1.8% of the revenues are from Tata Motors finance.

Global workforce

  • Segment wise: 67,356 employees in automotive segment and 7,992 in other segements.
  • Location wise: 37,286 employees in India, 37,992 employees in Abroad.

Key performance indicators

Sales volume: sold 8,37,783 vehicles in FY 21 ( excluding JLR ), down 12.9% from FY 20. Volumes were impacted mainly in Q1 FY 21 on account of the Covid-19 pandemic. The business witnessed strong sequential recovery thereafter.

Passenger vehicles sold: Tata and other brand vehicles, 2,22,638 PVs sold, up 61.4% from FY 20. Strong response to ”New Forever Range”, outperforming the industry.

Commercial vehicles sold: Tata and other brands, 2,67,513 CVs sold, down 23% from FY 20. several headwinds including pandemic, lower capacity utilization, rising costs, financing challenges impacted the overall CV industry.

Jaguar & Land Rover: 3,47,632 vehicles sold, down 27% from FY 20.

Net auto debt: 40,876 crore rupees.

Patents granted: 79 patents granted in FY 21, down 55.6% from FY 20. In FY 20 178 patents were granted.

Tata motors in EV segment

Tata Motors has been at the forefront of providing electric mobility solutions in the market. The Nexon EV is driving the growth of the EV industry in India with a 65% share of total sales in FY 21.

Tata Motors with a wide range of mass mobility solutions is the largest passenger commercial vehicle manufacturer in the country.

Under the FAME I and II schemes of the government, Tata Motors has already supplied more than 350 electric buses.

Tata motors also deriving synergies from the ecosystem of Tata group companies comprising Tata power, Tata chemical, Tata Autocomp Systems, among others, to develop EV infrastructure in India.

UK government recently revised the phase-out date for the sale of new petrol and diesel cars and vans to 2030 from 2035, while the governments of other countries including Norway and the Netherlands announced goals of banning new petrol and diesel cars. The government of India has also shown strong intent of driving EV adoption in the last few years and has introduced several policies.

EV advantage of Tata motors: Tata uniEVerse

Tata motors is the biggest beneficiary of EV push in India. Already Tata motors is leading in the EV segment with a market share of 70%, which is awesome.

The main and the biggest advantage of Tata motors is, Tata group has a lot of other companies whose business is in the EV segment.

Tata motors have an ecosystem of companies that work in the EV segment. for example, Tata power works in proving charging infrastructure, Tata chemicals is manufacturing Lithium-ion batteries, Tata Elxsi business is developing technologies related to EV solutions and services, and also Artificial intelligence.

Tata motors have a huge advantage over its competitors. As Tata already has an ecosystem of companies in the EV segment, Tata motors will get all these infrastructures at a lower cost than any other company, which gives Tata motors an advantage of low production and manufacturing costs. As a result, Tata Motors can price their vehicles at a lower competitive price.

A snapshot of EV segment in FY21

  • 71.4% market share.
  • 218% volume growth.
  • 100 plus captive charging points.
  • 4,000 NEXON EV sales since launch.
  • 3000 plus AC chargers.
  • 355 plus public charging networks.
  • Has presence across 50 plus cities.
  • 93 sales touchpoints.

Tata motors subsidiaries: Key subsidiaries

  • Jaguar and Land Rover Automotive.
  • Tata Motors European Technical centre.
  • Tata Motors insurance broking and advisory services limited.
  • TMF holdings limited.
  • TML distribution company.
  • Trilix Srl.
  • Tata technologies limited.
  • Tata Marcopolo motors limited.
  • TML holdings pte. limited.
  • Tata Daewoo commercial vehicle company.

Tata motors fundamental analysis: Financials

ParticularsTata motors
Market cap1,69,202 Cr
Price to earnings
( P/E )
40.27
Price to book value
( P/B )
9.61
Price to sales
( P/S )
3.40
Price to cash flow
( P/CF )
23.95
Sales growth
( 5 years )
1.88%
Profit growth
( 5 years )
-305%
ROE ( 5 years )11.25%
ROCE ( 5 years )0.39%
Debt to equity1.14
sales growth
SALES GROWTH
profit growth
PROFIT GROWTH

The fundamentals of Tata motors are not so good. Tata motors have a significant debt of over 40,000 crore rupees and debt to equity of 1.14.

Also read: 5 important financial ratios.

Price to earnings

PE stands for the price to earnings. It signifies that how many times an investor is paying for 1 rupee of earnings, the PE ratio of Tata motors is 40.27, which tells that an investor is paying 40 rupees for 1 rupee of Tata motors earnings.

If the PE is high, it means the company is trading at a higher valuation. The PE of Tata motors is 40.21, which is overvalued. The PE ratio of the industry average is just 21.58.

Sales and profit growth

Tata motors is failing to generate sales and profits efficiently. These are very poor numbers from Tata motors, but the main reason to buy and hold Tata motors is due to the rise of the EV segment. As of now the financial numbers of Tata Motors are very poor.

ROE

ROE stands for return on equity. ROE signifies how efficiently the company is using its funds or cash to generate revenues or profits. The higher the ROE is, the higher the Efficiency, which is positive for the company.

The 5 years average ROE of Tata motors is 11.5%.

ROCE

ROCE stands for return on capital employed. ROCE is also the same as ROE, the only difference is ROCE considers the debt of the company. Whereas, ROE does not consider the debt of the company. So if a company has a debt, the ROE doesn’t make any sense, as it does not consider the debt of the company.

The ROCE of Tata motors is 0.39%, which is very low when compared to its peers.

Tata motors fundamental analysis: profit & loss

ParticularsTata motors ( FY2020-21 )
Net sales47,031 Cr
Profit before tax-2,312 Cr
Net profit-2,395 Cr
EPS-6.26

The net sales of Tata motors is 47,031 crore rupees, profits before tax is -2,312 crore rupees, net profit is -2,395 crore rupees, and EPS is -6.26.

The numbers are very poor, Tata motors is a loss-making company and the financials and fundamentals are very poor.

Tata motors management is failing to perform efficiently.

Tata motors fundamental analysis: Balance sheet

ParticularsTata motors ( FY 2020-21 )
Equity & liabilities
Share capital765
Total reserves18,290
Borrowings16,326
Other N/C liabilities3,425
Current liabilities26,251
Total liabilities65,059
Assets
Net block26,423
Capital WIP1,400
Intangible WIP1,605
Investments16,114
Loans & advances1,854
Other N/C assets1,805
Current assets15,854
Total assets65,059
All figures are in crores

How to read, analyze or understand a Balance sheet.

Tata motors fundamentala analysis: cash flow statement

ParticularsTata motors ( FY2020-21 )
Profit from operations-2,312
Adjustment4,273
Changes in assets & liabilities4,782
Taax paid-63
Operating cash flow6,680
Investing cash flow-2,988
Financing cash flow-3,471
Net cash flow220
All figures are in crores.

How to understand a cash flow statement.

Tata motorsfundamental analysis: shareholding pattern

Holding %
Promoters46.41
Pubic17.32
DII11.62
FII14.28
Others0

Tata motors fundamental analysis: stock performance

tata motors fundamental analysis

Tata Motors has grown 297% from the last year, grown at a CAGR of 44% for the last 3 years, but fallen at a CAGR of -1.4% for the last years.

Tata motors had given negative returns for the investors who invested five years back. Tata motors have hugely rallied in recent times, after the covid-19 pandemic. But for the investors who invested five years back are still sitting with negative returns.

Future outlook

If you want to invest for the long term then you can definitely consider Tata motors. The main reason for this is the electric vehicles segment. Fundamentally Tata motors is strong, but financially the numbers of Tata motors are hugely disappointing.

Tata motors have a huge advantage over its competitors, due to the ecosystem created by other Tata companies. Tata power provides charging infrastructure, Tata elxsi provides technology, Tata chemicals provides Lithium-ion batteries. Already Tata motors is holding 71% of the market share in the EV segment.

If this continues, even in the future, Tata Motors will have an edge over its competitors.

Frequently asked questions

Is Tata motors share undervalued?

No, currently Tata Motors’ share is overvalued. The PE multiple of Tata motors is 40, whereas the PE of the industry average is just 21. By this parameter, we can clearly say that Tata motors is overvalued. Not only this, the key financial ratios and numbers are also not even close to its competitors. but still, Tata Motors is trading at higher valuations due to its future outlook.

Is Tata motors debt free?

No, Tata motors is not a debt-free company. Tata motors have a debt of over 40,000 crore rupees. The debt to equity of Tata motors is 1.14.

Is Tata motors a good buy?

Yes, if you want to invest for the long term then Tata motors is a good buy. The reason for this is, Tata motors have a huge advantage in the EV segment over its competitors. Tata has an ecosystem of companies in the EV segment. Tata Power will provide charging infrastructure, Tata Elxsi provides technology, and Tata chemicals will provide batteries.

Related Articles

ITC vs HUL

INFOSYS FUNDAMENTAL ANALYSIS

ASIAN PAINTS vs BERGER PAINTS: FUNDAMENTAL ANLYSIS

TCS FUNDAMENTAL ANALYSIS

BEST STOCKS BELOW RS 50 IN INDIA

IDFC FIRST BANK SHARE PRICE TARGET 2022, 2025

ITC FUNDAMENTAL ANALYSIS

TATA POWER SHARE PRICE TARGET 2022

INTERESTING FACTS ABOUT ITC